Tag Archives: accounting

Church Office Software – What Makes it Different?

Church office software has various shapes and sizes. It is appropriate to distinguish between “church software” and “church office software”.

Church Software” – is any type of computer software specifically designed for use by a church”. Church software can encompass different types of software such as: bible verse, media production, donation, accounting, mass emailing, sermon, worship, and music software.

Church Office Software is one of the sub types of church software. Typically, the secretaries and financial staff use it in the office. Examples of this type of software are membership, contribution, accounting, newsletter generation, office communication tools, word processing, and spreadsheet software. The software is the heartbeat of the organization. For example, churches can still do their mission if they did not have music or media production software. Conversely, if they do not pay their bills or record donations the church doors will not be open too long.

Church office software is so vital to the mission of the church in keeping it running and the doors open, would it not be beneficial to ensure you choose one that fits your organization and still obeys government guidelines (e.g. IRS, FASB, etc). If the church could choose one thing to be correct within their organization what would it be? Most churches would choose to have the financial books correct. After all, if the church sings the wrong song on a Sunday the IRS won’t be there on a Monday issuing a violation.

Most churches realize the importance of correct financial books; however this area of ministry comes second to all the other activities in the church. When reviewing software, churches focus on the integration of membership or building a community. While these are important, they will not keep the organization out of trouble like having correct financial records. Choosing software that keeps you in check with government agencies first while building a community is the best way to start looking at software packages. It is safe to say that if the software does not have accounting included it is not worth looking at as a complete Church Office Software.

Churches some times fall into the trap of software longevity. Icon Systems can honestly say a company’s longevity in the market is not a good indicator of following the guidelines for financial reporting. If the church is unsure we recommend they do their due diligence and investigate the financial reporting requirements. A good start is to review the blog about “Fund Accounting Methods Compared“. The post discusses scenarios of incorrect guidelines according to FASB that are used in the church software industry.

While all church software is important, if certain software is not used the organization can suffer dire consequences. An organization can lose their tax-exempt status when audited with incorrect financial statements according to the FASB guidelines. Whenever there is uncertainty about proper financial reporting of money within a church, distrust spreads within the organization’s members. An organization using a FASB compliant system like IconCMO cloud base solution can be assured they are within guidelines.


Church Bookkeeping Software vs Church Accounting Software

Church Bookkeeping Software vs. Church Accounting Software

Is there a difference between bookkeeping and accounting? If so, what is it?

Businessdictionary.com Definitions

Bookkeeping:

The systematic recording of financial aspects of business transactions in appropriate books of account.

Accounting:

The practice and body of knowledge concerned primarily with:

1.    Methods for recording transactions
2.    Keeping financial records
3.    Performing internal audits
4.    Reporting and analyzing financial information to the management
5.    Advising on taxation matters

It is a systematic process of identifying, recording, measuring, classifying, verifying, summarizing, interpreting and communicating financial information. It reveals profit or loss for a given period, and the value and nature of a firm’s assets, liabilities and owners’ equity.

Accounting provides information on:

1.    The resources available to a firm
2.    The means employed to finance those resources
3.    The results achieved through their use

Summary

From the lengthy definition, it is obvious that accounting is somewhat more complex than bookkeeping. Basically, bookkeeping is the tedious task of entering the amounts and dates of revenue and expense transactions (i.e. contributions and purchases). Accounting is the bigger picture: an accounting system uses the bookkeeping information to create reports that can be used by decision-makers and for tax purposes.

Most church software applications accurately handle the bookkeeping part: tracking member donations and spending, even the printing or emailing contribution statements to members and generate giving total reports. Unfortunately, many of these applications fall short when it comes to the most important aspects of having accurate accounting records and providing the reports required by the Financial Accounting Standards Board. For more details, please read our post Fund Accounting Methods Compared.

Conclusion

All businesses, for profit or not, need accurate bookkeeping software to avoid negative consequences (e.g. fines, damaged reputation, having to close the business). These repercussions tend to be magnified for nonprofit organizations; they face losing their tax-exempt status, and the loss of credibility can prove to be devastating since the general public tends to hold churches and nonprofits to higher standards.

Icon Systems understands the value of accounting standards, and we make every effort possible to provide you with the tools necessary to ensure your church is in compliance with FASB guidelines. We even hired an outside CPA firm to certify our software, IconCMO, meets these standards!


Church Donation Software 4 Key Elements.

When churches are looking for church donation software, they should make a list of the specific functionality they want immediately. Additionally, what needs exist in the next 5-10 years for the church donation software? Smaller organizations and church plants may not be ready for online donations however; the availability of this option later is crucial.

Entry of Data – Technology has helped contribution entry in various ways to get data into church donation software. Church donation software should include manual data entry, data file upload, and the ability to update donors records for online and EFT donations seamlessly. Additionally, mistakes happen and contribution corrections should be easy to make. The process should allow you to modify the giving date, fund assignment, check/cash tracking, comments, amount, or remove the transaction completely. Integration into the church accounting module from contributions removes additional key entry mistakes and time for double entering during posting.

Pledging – Pledge tracking by fund(s) is an important way for the church to know how much can they expect to come into the organization. Pledging can tell churches when people are falling behind throughout the year. It can also advise overall how much donations are ahead or short of the total pledge for the year. Pledging on multiple year funds with various donor commitment date ranges is essential.

IRS Statements – Entering data is useless if the system cannot provide an IRS statement for donors. Churches should be able to print or email statements, with the later saving on postage. Other options on statements include the pledge amount, church logo, different formatting styles, a personal message and comments. Criteria for producing the statement can vary such as: status codes, date range, sort options, funds to include, people that have given, non givers, people that have pledged but have not given, etc.

Tax Type Categories – Tax Exempt, Taxable or IRA, should categorize all the funds to allow removal of certain fund during IRS statement preparation. The organization should be able to add or change the fund names at any time but still maintain the category. A taxable fund example is money collected for coffee or donuts on a Sunday. A tax-exempt fund is money given with no return of good or services and donors expect a donation statement. Additionally, the IRA contribution is when someone donates his or her IRA proceeds to the organization.

Church donation software is an important aspect to any church and should have the most streamlined processes in place. It should also include some of the basic concepts above for starters and additional features like a link to an acceptable fund accounting package. Additional features include transferring monies from one envelope to another, ability to change envelope numbers, print deposit slips, and create reoccurring batches. Icon Systems’ IconCMO can help churches with this process and we look forward to hearing any comments you may have on this topic.


The Secret to Affordable Church Payroll Software! (Part 1)

Payroll is one of the most difficult, time consuming, and costly administration tasks churches repeatedly encounter. Churches of all sizes are required to use “fund accounting” as described by the Financial Accounting Standards Board (FASB) guidelines. Fund accounting is a specialized way of accounting designed for non-profits; if you use this accounting method we recommend you read this informative interview with Nate at The Church Accounting Software Guide.

More often than not, Payroll + Fund Accounting = Confusion

FASB Reporting guidelines add to the difficulty, time, and costs already associated with payroll. For example, churches can use money in the General Fund and the Youth Fund to pay the Senior Pastor and Youth Pastor, respectively. Alternatively, both Pastors may be paid using money from the General Fund. On top of regular income, IRS reporting and taxes vary for items such as housing allowances and vehicle expenses. Paying church staff members can also prove to be tricky; reporting and taxes for hourly or salaried employees follow a completely different set of guidelines altogether. Payroll management also tends to get significantly more complicated for multisite organizations.

Payroll does NOT have to be time-consuming

The initial setup of a payroll system is expected to take some time; however, this task may be considered to be of lesser importance since it is not recurring. Completing the payroll for each pay period, on the other hand, needs to be fast and relatively simple. An effective, easy-to-use church payroll solution will substantially reduce the time needed for you to complete recurring payroll cycles, therefore lowering the overall costs associated with payroll. Evaluate your current payroll system by asking yourself these questions:

  1. How long does it take me to print employee paychecks?
  2. Can I pay tax liabilities to government agencies quickly and efficiently with only a few clicks of the mouse?
  3. Are the liability accounts automatically updated when I cut checks to make these payments?

*Making consistent entries to liability and expense accounts each pay cycle minimizes the likelihood of mistakes.

The Ultimate Cost-Saving Secret:

Systems that charge thousands of dollars for payroll essentially offer the same benefits and features as basic payroll software. Some of the expensive payroll systems do not even comply with fund accounting guidelines. The price of church payroll software is dependent on who enters the tax formulas, so find a package that requires the church to input the tax formulas. If your church leaders are willing to put in a few hours of work at the start, they can save the church hundreds if not thousands of dollars each year in payroll expenses.

Icon Systems has streamlined the recurring task of paying employees by incorporating payroll into the IconCMO fund accounting software system in order to reduce the difficulty, time, and high costs associated with church payroll administration!


Postal Service May Eliminate Non-Profit Discount.

The Postal Service (USPS) with the help from Rep. Darrell Issa is trying to eliminate the 40% discount for mailing that non-profits enjoy. HR2309 is the law that Congress is trying to pass which would eliminate almost all but 10% of the non-profit discount within 6 years. At Icon Systems, we forecasted this years ago when the postal service was recording annual losses and trying everything to increase revenue to cover their expenses. This bill will increase the burden on churches and other Postal Service patrons. Many church software companies were trying to get their church software PAVE/CASS certified, but these can only reduce postal costs when a discount is available. In some cases, these certifications may increase costs. With the use of electronic communication, churches can reduce or even eliminate these costs.  Providing newsletters, contribution statements (IRS statements), and other communications through electronic means within IconCMO or our partners is an easy way to save precious donations for other critical items in your church.

While we feel the elimination of the discount will not help the USPS solve their financial issues, it will strengthen each church’s resolve to use electronic communication more effectively.  Non-profits will turn to newer technology and limit their use of the USPS. Icon System’s IconCMO church software is available to help churches use these technologies: cutting costs and ensuring that the church saves time, money and resources each year.


6 Steps to Maintaining your Church Tax Exempt Status.

Lauren Hunter did a wonderful write up of what to look for in church software. Please read the full article. Below is just a summary of some of the information you will find.

Know what regulations pertain to churches and what organization creates them. Understand and know why you cannot keep balances in the revenue and expense accounts. Additionally, liabilities should not have fund balances because liabilities are money owed and not money the organization owns. Does church size matters when it comes to accuracy of church reporting or does the church have to report the financials at all?  There are two major repercussions of having bad financials. One is moral and the other is legal.  When an organization is out of compliance trust is lost in the community, which is the moral issue and is very hard to recover. The other is the church can lose its tax-exempt status and cannot claim to be a tax-exempt organization legally. Find out where to go to get more information. Tell us what you think.


Why Church Accounting is Important – Do Not Lose your Tax Exempt Status!

At Icon Systems we are always looking out for our clients and wanted to pass this information on to you. Does your current software provide the right financial reports for the IRS? Ask the 3,000 organizations in Orange County, CA that lost their tax exempt status and it came down to not filing their financial records with the IRS. Small organizations are not exempt from this reporting requirement anymore as many believe. The IRS has revoked approximately 325,000 non profit tax exempt organizations this year alone. It will only get worst when non-profit organizations use sub-standard accounting packages that do not provide accurate reports based on the fund accounting standards. These standards are provided by the FASB organization and specifically written in the FAS 95, 116, and 117 regulations. Please see a more in depth discussion with the church accounting software guide about these guidelines.


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